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Adopt or innovate: understanding technological responses to cap-and-trade

Calel, Raphael (2020) Adopt or innovate: understanding technological responses to cap-and-trade. American Economic Journal: Economic Policy, 12 (3). pp. 170-201. ISSN 1945-7731

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Identification Number: 10.1257/POL.20180135

Abstract

One important motivation for creating cap-and-trade programs for carbon emissions is the expectation that they will stimulate much-needed low-carbon innovation. I construct a new panel of British firms to investigate this hypothesis, finding that the European carbon market has encouraged greater low-carbon patenting and R&D spending among regulated firms without necessarily driving short-term reductions in carbon intensity of output. This stands in contrast to past cap-and-trade programs, which have primarily spurred adoption of existing pollution control technologies, with little effect on innovation. I discuss how to reconcile these contrasting findings and implications for the future of carbon markets.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/pol
Additional Information: © 2020 American Economic Association
Divisions: Grantham Research Institute
JEL classification: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O34 - Intellectual Property Rights: National and International Issues
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Costs; Distributional Effects; Employment Effects
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Date Deposited: 27 Aug 2020 09:51
Last Modified: 20 Jan 2021 07:10
URI: http://eprints.lse.ac.uk/id/eprint/106257

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